One entrepreneur's tale: The highs and lows of outside investment

Scott Rediger turned to venture capital to fund all three of his startups. Photo: Erik Unger

Venture capital helped Scott Rediger make and lose a lot of money over the past 13 years. Now he's giving it another try.

The CEO of Access Media 3 Inc. in Oak Brook, Mr. Rediger, 41, secured $10 million in funding for the company from Denver-based Meritage Funds and WP Global Partners Inc. of Chicago in November. Access Media 3 provides Internet, cable TV and telecommunications services to condominium and apartment complexes and retirement centers. Mr. Rediger started the company with three partners by buying half the ownership of a small Internet operator in January 2007.

It's his third startup. After beginning his career with MFS Communications Co., an Oak Brook fiber-optic long-distance and Internet network company later sold to WorldCom, Mr. Rediger and a partner co-founded Ovation Communications Inc. in 1997. He raised $12 million in funding from Boston-based M/C Venture Partners before Ovation, which built data and fiber-optic networks, had its first customer.

"It was a business plan, a strategy, a missing presence in a marketplace that created a good investment opportunity," Mr. Rediger says. He later secured an additional $4 million in equity and $12 million in debt to fund the company's growth. Ovation launched in Minneapolis and expanded to four markets in two years, when Mr. Rediger sold it for $402 million, reaping a windfall.

In February 2000, he started a data center managed services company, Dantis Inc., with his own money and secured investor commitments of $75 million in equity and another $75 million in debt, again before Dantis had any customers. This time, though, he got caught in the dot-com bust, and his investors slowed the funding.

"It made it very difficult to grow the business," Mr. Rediger says. Dantis received about $45 million of the expected financing before its board decided to shut it down.

Mr. Rediger says his own financial loss on the venture was significant, but "not one part of that scared me away from the private-equity world." Still, he moved cautiously when looking for venture capital for Access Media 3, passing on a $12-million investment in November 2008, when the credit crisis made money of any kind hard to come by.

"The investor's liquidity plans were very different than what the company would have needed to grow. We had term sheets on the table, and we walked away," he says.

Instead, Mr. Rediger and a partner led a $1-million round of funding from friends and family in January 2009. The money allowed Access Media 3 to serve clients and make small acquisitions that accelerated growth.

Mr. Rediger says the company has grown from serving 15 buildings when he bought the enterprise to more than 300 in Chicago and the Twin Cities today. He plans to expand to other markets, using the $10-million investment to grow his salesforce and make acquisitions  including three completed since the venture funding.

"We waited on the right partner," says Mr. Rediger, who talked to more than 30 venture-capital and private-equity firms in Chicago, New York, Boston and Los Angeles. "They don't just come with money  they come with operational experience and contacts." He also says the investors' five- to seven-year time frame for cashing in on the investment gives him enough time to grow Access Media 3 the way he wants.

"Private equity has its place in growing a business, as long as everybody's aligned and you share common goals," he says.